Classic-car sales are on the rise

Investors are savvier; vehicles are high end

By David Grainger, Postmedia News

Originally published: February 22, 2011

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A few of weeks ago, I wrote regarding the profit potential that can be reached by savvy investors who purchase good quality collector cars. Since then, there have been several events that have proven the point.

The first was an announcement by the IGA Management Fund in the U.K. that it was creating a new fund called the Iconic Car Fund. This new fund has Nick Mason of Pink Floyd fame as its spokesman.

Mason has long been a car enthusiast and amateur race driver. The fund plans on using up to $150-million to purchase high-quality, important cars around the world and then re-sell them at an appropriate time. It is being touted as a car fund for people who don’t like or know anything about cars. The hook is a forecasted 15% return. You can get in for an initial investment of around $500,000. I guess a 15% return is pretty good in the investment world these days, but I wouldn’t be happy with it. Here’s why:

Five years ago, a fully restored Mercedes Gullwing Coupe with Rudge wheels and a good history could sell for as much as $600,000. Many sold for considerably less. A few years ago, when I was locating one for Conrad Black to replace a Gullwing he had regretfully sold, I found one — an original silver car with red interior exactly to his order in the U.S. Midwest for $310,000. That was cheap even then. Still, it was not cheap enough for Lord Black and he passed.

He should have bought it.

RM Auctions announced it recently sold a 1955 Mercedes Gullwing for $1.375-million. This car was originally white, but it had been painted slate grey during a comprehensive restoration. It was also equipped with Rudge wheels when restored. Considering this was not an original car and that its provenance was good but not spectacular, the figure is an outstanding result if not a little incomprehensible. It doesn’t matter why it sold for so much; it has set a new benchmark. Any Gullwing offered at $600,000 prior to the auction will likely not be offered for that little again — unless the owner is living in a cave.

Near and dear to my heart is a 1956 Eldorado Biarritz convertible that was also sold by RM for $286,000. And Russo and Steele, another auction house, sold a 1957 Eldorado Biarritz convertible last month for $186,000. I thank my lucky stars that a ’57 Biarritz convertible I had for sale last fall at the Bonhams auction in Fairfield, Conn. failed to reach its reserve and I brought it home. What seemed like bad luck then has turned into very good luck now. It seems an additional $50,000 can be realized above my previous reserve on the car — that is if I don’t get greedy. Other cars I have in my possession have seen their values rise similarly, or even better in the last year or so.

Following the trend on Bugattis rising steadily into the stratosphere, a 1939 Bugatti Type 57C — a fairly unremarkable car in Bugatti terms — sold for $913,000. Five years ago, it would have been a $400,000 car; perhaps not even that much.

The Gooding auction in Scottsdale, Ariz. last month posted other stratospheric sales. A Porsche 904 Carrera achieved $1.045-million, an auction record for a 904. A Lamborghini Miura sold for $990,000. Miuras have always been pricey, but, just more than 10 years ago, you could have bought one for only $80,000.

Just to prove that Gullwings are ascending in price, Gooding sold another example for $858,000. The auction house was likely very pleased with itself until it found out how much the RM-represented car brought.

So, a new gold rush has begun, much like the Japanese investor-driven rush to buy cars in the early 1990s. But there is a difference — at least so far. Investors are savvier these days, and the main thrust seems to be cars that are very high end and expensive to start with. Mind you, if the rush gets any larger, it may spread out as the high-end cars become so sought after they become unattainable — aside from investment groups or billionaires.

Another group of cars that stalled for a few years also seems to be taking off again — luxury cars from the 1930s. These cars levelled off and some actually decreased in value for a while. But the last year or so has seen a renewed interest in outstanding examples of Duesenbergs, Packards, Cadillacs, Pierce-Arrows and other grand American marques. And these cars are not just rising in small increments. It seems the doubling or tripling phenomenon might soon reach these cars as well.

The morbidity of post-war cars — especially American muscle cars — might also be loosening. Russo and Steele recently sold a Plymouth Hemi Cuda convertible for more than $1-million.

This could lead to a strengthening in cars that are a little more common — but don’t go getting excited about the ’65 Pontiac four-door parked behind your grandfather’s cottage. Mind you, if Granddad squirrelled away a fuel-injected ’57 Chevrolet, then you can get excited.